A company is considering working capital investment for next year. Estimated fixed assets and current liabilities for next year are Rs. 2.60 crore and Rs. 2.34 crore respectively. Sales and EBIT depend upon current asset investment. Company is considering following alternative policies: Working cap policy Investment in CA Estimated sales (crores) EBIT (crores) Conservative 4.50 12.30 1.23 Moderate 3.90 11.50 1.15 aggressive 2.60 10.00 1.00 Calculate: rate of return on total assets, net working capital position, current ratio, current assets to fixed assets ratio for each policy. Discuss risk-return trade-off for each policy
A company is considering working capital investment for next year. Estimated fixed assets and current liabilities for next year are Rs. 2.60 crore and Rs. 2.34 crore respectively. Sales and EBIT depend upon current asset investment. Company is considering following alternative policies: Working cap policy Investment in CA Estimated sales (crores) EBIT (crores) Conservative 4.50 12.30 1.23 Moderate 3.90 11.50 1.15 aggressive 2.60 10.00 1.00 Calculate: rate of return on total assets, net working capital position, current ratio, current assets to fixed assets ratio for each policy. Discuss risk-return trade-off for each policy
Chapter16: Working Capital Policy And Short-term Financing
Section: Chapter Questions
Problem 4P
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Question
A company is considering working capital investment for next year. Estimated fixed assets and current liabilities for next year are Rs. 2.60 crore and Rs. 2.34 crore respectively. Sales and EBIT depend upon current asset investment. Company is considering following alternative policies:
|
Working cap policy |
Investment in CA |
Estimated sales (crores) |
EBIT (crores) |
|
Conservative |
4.50 |
12.30 |
1.23 |
|
Moderate |
3.90 |
11.50 |
1.15 |
|
aggressive |
2.60 |
10.00 |
1.00 |
Calculate: rate of
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